Why Bankruptcy May Be the Best Thing for Detroit

While the rest of the world scoffs at Detroit’s recent announcement of bankruptcy (using it as an opportunity to bemoan how far the city - and the country - has fallen since its golden Motown days), many Detroiters themselves are embracing the move as a long overdue turning point.

Like Las Vegas, undergoing an urban patronage from Zappos CEO Tony Hsieh, Detroit has similarly been the focus of its own CEO: native-Detroiter and Quicken founder Dan Gilbert. By channeling over $1 billion dollars into the city, and inspiring others to follow suit, Gilbert is helping Detroit attract young, tech-savvy entrepreneurs. Throw in the lure of cheap land/rental rates, and it’s no wonder the city’s is host to a burgeoning tech scene.

The only thing that’s been getting in these techies' way - is the city itself. Which is why many are hopeful that Detroit’s bankruptcy is just the beginning.

More after the break...

Detroit’s tech-emergence has come about hand in hand with an (in-process) urban revitalization. In the midst of dissolving public infrastructure and massive foreclosure (about a quarter of all homes are abandoned), the private sector has become Detroit’s only beacon of hope.

One of the greatest symbols of Detroit’s burgeoning tech renaissance is the M@dison Building: once a movie theater, now the heart and 50,000-square-foot home for about 300 entrepreneurs, investors, and developers (including Twitter). Quicken’s Gilbert has also contributed greatly, not just buying and renovating office towers, but also identifying underused infrastructure, most recently offering to take on and adapt an “unsightly and over-budget jail.”

As a result, hundreds of college grads are going to Detroit to “land higher-impact roles [...] than they might find at comparable companies in larger urban tech hubs such as San Francisco, Chicago, or New York.” And they’re meeting with considerable success.

In fact, in the words of FastCompany reporter Chuck Salter, who’s been fastidiously reporting on Detroit’s fall/rise for the last few years, the greatest “threat to their progress” is the strapped city itself, plagued with mismanagement, corruption, and multi-million dollar debt.

So, according to Salter, Detroit’s bankruptcy is a necessary “pivot”; as in business, “If something fundamental isn't working--the business model, the core technology--you make a dramatic change, despite the risk and short-term pain. It's a gambit for the long-term survival of the enterprise.”